A friend of yours is considering two cell phone service providers. Provider A charges $110 per month for the service regardless of the number of phone calls made. Provider B does not have a fixed service fee but instead charges $1 per minute for calls. Your friend's monthly demand for minutes of calling is given by the equation QD = 100 - 20P, where P is the price of a minute.
With Provider A, the cost of an extra minute is $0. With Provider B, the cost of an extra minute is $1.
Given your friend's demand for minutes and the cost of an extra minute with each provider, if your friend used Provider A, he would talk for 5 minutes, and if he used Provider B, he would talk for 90 minutes. This means your friend would pay $110 for service with Provider A and $90 for service with Provider B.
Your friend would obtain $0 in consumer surplus with Provider A and $10 in consumer surplus with Provider B.
Given this information, which provider would you recommend that your friend choose?
Provider A
Provider B